China’s chemical industry hopes for a turnaround

After suffering a year of declining profits and overproduction, China’s chemical industry is expecting a smoother 2025, thanks in part to government financial stimulus.

According to data released Dec. 16 by the National Bureau of Statistics of China, the country’s chemical raw materials and chemical product manufacturing industry grew 9.5% in the first 11 months of 2024, but profits fell 7.7% in the period. In comparison, profits for large Chinese enterprises across all industries dropped an average of 4.3%. A plummeting real estate industry played a big role in both profit declines.

In the first 9 months of 2024, over half of publicly listed chemical companies reported lower profits, according to a report released by the Shenzhen-based investment bank Guosen Securities.

Yet industry executives have reasons for optimism. Starting in late September, the Chinese government has been rolling out massive economic stimulus measures, including loans of more than $1.3 trillion to help local governments pay their debts and stimulate their economies. A chunk of the funds went to state-owned enterprises to buy unsold properties and use them for low-rent apartments. Thanks to such measures, the real estate market in big cities like Beijing and Shanghai has stabilized, though the sector remains in a slump nationwide.

“With the decline in raw material costs and the gradual recovery of downstream demand, the supply and demand structure of the chemical industry is expected to improve and the business atmosphere will pick up,” says Yang Lin, chief chemical industry analyst at Guosen.

Another encouraging sign is the rapid expansion in production of new materials such as high-performance alloys, graphene, biodegradable plastics, and materials for semiconductors, lithium-ion batteries, and photovoltaics. At a Dec. 17 press conference held by the Ministry of Industry and Information Technology, Chang Guowu, director of the ministry’s raw materials department, said that the new materials industry grew by more than 10% in 2024 and that sales should exceed $1.1 trillion.

Another bright spot for Chinese chemical companies is the inroads they have made against European competitors, which face higher production costs, according to a report by the Shanghai-based investment bank Orient Securities. Overall, recovering demand and an ebbing of oversupply may make 2025 a better year for China’s chemical industry, the report says.

One cloud is the higher tariffs on Chinese goods threatened by US president-elect Donald J. Trump. Qiu Dengke, secretary general of the government- supported Guangzhou Low-Carbon Industry Association, points out that China’s chemical exports to the US are modest. “More observation is needed before making a final judgment,” Qiu says.